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If your hospital hasn't been achieving cost savings, maybe you need to make-or renew-a commitment to cost management.
AT A GLANCE
As a Healthcare CFO, you know that effective financial control has enormous impact on a hospital's bottom line. But how do you maintain that financial control? Well, a few simple improvements in cost management techniques-assigning accountability, adopting useful monitoring and reporting methods, and reducing resource consumption, among otherscan reap significant benefits.
Although not new in the lexicon of healthcare buzzwords, "cost management" is currently being tossed around in discussions of ways to help improve hospital bottom lines. GEOs are showing up at conferences that feature cost management topics, and COOs are pinning down CFOs for oneon-one primers on where the money is "hidden." Meanwhile, CFOs are scrambling to locate that elusive pot of cost management gold at the end of the rainbow.
Several issues are at the heart of managing cost: the quality of a healthcare organization's overall management, cost accounting issues that affect cost management, techniques that help organizations to save "real money," and tools that can help organizations achieve cost-management goals.
Cost Management as a Subset of General Management
Before we can discuss cost-management improvement techniques, it is important to recognize that cost management is a subset of overall management. As such, cost management will be only as good as the general management techniques applied throughout the organization. This is not a small matter. In any organization, the quality of the overall management determines whether cost-management techniques-or any other management techniques, for that matter-will succeed or fail.
First, it is imperative that the organization set management goals. This may seem simplistic; however, experience has shown that many organizations' management goals are contained within their budgeted expense line items. Such "goals" are not particularly helpful because they have been set in a fixed budgeting methodology, which does not take into account higher or lower volumes-a key element in the success or failure of a healthcare organization. Best-practice organizations set goals for cost per workload unit across the spectrum and have developed excellent reporting and monitoring techniques to ensure that their managers are meeting those goals.
Another primary requirement for effective management-one that is often overlooked, unfortunately-is accountability. Although many organizations claim to...